A modicum of good economic news, at least on the commodities front: rice prices are headed for their biggest weekly drop in four years, on the prospect that exports from Japan and Pakistan will ease concerns that a global food shortage is worsening, Bloomberg News reported Friday.

As of mid-day Friday, rice had plunged 14% this week to $19.80 per 100 pounds.

Pakistan, the world's fifth-largest rice exporter, will allow shipment of 1 million metric tons because local needs have been met, Bloomberg News reported Friday. India may also ease its ban on rice exports. Rice is a staple for about 50% of the world's population.

Long-term, secular factors, including expanding middle classes (who consume more calories daily than lower-income groups) in Asia and Latin America, rising oil prices (which increase farming costs), have propelled a global rise in commodity, ingredient, and food prices.



Two changes to contain food prices

Economist Glen Langan, whose specializations include agricultural economics, said two factors - - one psychological, the other physical - - must be set in motion to break the upward price vector for food in the developing and developed worlds.

The first, concerning trading, will occur when institutional investors, among others, "sense that outsized returns on equity are no longer possible in grains," Langan said. We're not there yet, he said, because the preponderance of evidence suggests solid emerging-market economic growth will continue through at least 2009, and probably longer.

The second, concerning arable land / space utilization, is already being set in motion, he said. If developed / developing world nations utilized space on a par with Japan, food shortages would be rare, and food prices would moderate, Langan said. What's Langan referring to? "Right of way zones, empty spaces, backyard gardens, roof top garden, and other plots," he said. "Nations, and particularly the west, don't use a lot of space. A lot of it is wasted as empty or fallow. That's going to change, as it has and will continue to change in India, and throughout the east. We'll see more of it in the U.S. and the west as food prices continue to rise."

New seeds and more-weather-tolerate / disease resistant crops will also help to slow the growth in grain and food prices. Still, Langan underscored that given consumer demand implied by the current global economic expansion, the world will still experience "at least 2-3 more years of above-trend, rising food prices before supply starts to catch up with demand."